By Swati Pandey
SYDNEY, Feb 28 (Reuters) - Australian home loans rose at their slowest monthly pace in more than four years in January with the annual rate the weakest on record as credit tightening by banks and a sharp fall in housing prices turn off demand.
Data from the Reserve Bank of Australia (RBA) on Thursday showed housing credit rose 0.2 percent in January from the previous month, the slowest increase since October 2015. The annual pace clocked at 4.4 percent.
Separate data from property consultant CoreLogic showed vendors were offering large discounts on their original asking prices in a bid to sell their property, with Sydney seeing more substantial reductions than during the 2008 financial crisis.
The figures bolster views that a sharp downturn in Australia's once-booming housing market has still further to run in a major headwind for consumer spending and economic growth.
The slowdown has also become a "significant uncertainty" for Australia's central bank which cut forecasts for economic growth and inflation earlier this month while opening the door for further policy easing. housing market conditions continuing to deteriorate, buyers thin on the ground and a high volume of stock listed for sale, it is reasonable to expect that over the coming months vendor discounting may increase further," said CoreLogic analyst Cameron Kusher.
That suggests prices will drop further even though auction activity in February bounced across the country with volumes surging the most since the start of the year. median vendor discount in Sydney is currently at 7.5 percent from 4.8 percent a year ago and the largest since February 2006. In Melbourne, vendor discounting at 7.0 percent is the biggest on record, CoreLogic data showed.
"This highlights just how weak housing market conditions are and how few buyers there are," Kusher said.
Home prices had broadly doubled in the major markets of Sydney and Melbourne in the five years to late-2017 and have since fallen more than 8 percent.
The RBA has called the current correction "inevitable" but "orderly" saying it will improve housing affordability and put the country's housing market on a stronger footing.
Still, an increasing number of economists are now tipping cuts to the official cash rate with Australia's No.2 lender Westpac becoming the first of the country's major banks to call for further policy easing this year.